The Financial Conduct Authority’s loan-to-income limits won’t make a big difference and feels like more of a pilot.
That is according to Tom Davies, group financial services managing director of estate and lettings agency LRG.
Lending at a loan-to-income level above 4.5 times is limited to 15% of a lender’s book, though the threshold in which this applies has today been increased to lenders with more than £150 million of loans, up from £100 million.
Davies said: “The FCA’s decision to raise the loan-to-income cap threshold is a step in the right direction, but it’s unlikely to have a significant impact in the short term. The change only applies to a small group of lenders who fall just below the new £150 million lending threshold – the vast majority of lenders are unaffected.
“In that sense, this feels more like a pilot, to gather, monitor behaviour, and assess the impact of loosening the cap if applied more widely. That approach makes sense. It’s cautious, but it gives regulators time to test outcomes before making larger systemic changes.
“What we’d like to see next is broader reform that addresses the real affordability barriers buyers face. Raising the cap is only beneficial if it genuinely helps people to borrow more responsibly. Without matching improvements to housing supply and planning reform, changes like this, while welcome, won’t move the needle on their own.”.
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